Ghana ponders dropping Ashanti’s “golden share”

Denver — Ghana’s Mining Commission has recommended that the government reduce its involvement in the gold industry, by scrapping state participation in mining operations and dropping its “golden share” in Ashanti Goldfields (ASL-N).

The proposed changes are in line with the economic philosophy of the new government under President John Kufuor. Under the previous administration of Jerry Rawlings, the government took a 10% stake in all significant mining operations and held a 20% stake in Ashanti, the country’s largest gold producer. Its holdings included the “golden share,” a single-share voting class that permitted the government to veto any significant change in Ashanti.

Many analysts blamed the “golden share” for disrupting the October 1999 takeover bid by Ashanti’s majority shareholder, U.K.-based Lonmin, which owns 32% of the shares. Lonmin offered US$7 per share for the remaining stake in the company, just as the price of gold shot up to US$325 per oz. from 20-year lows, pushing Ashanti’s aggressive hedging policy underwater and driving Ashanti shares to US$2. Banks got nervous and demanded margin calls, eventually hurting Ashanti’s ability to develop the giant Geita gold mine in Tanzania. It was later forced to sell 50% to AngloGold (AU-N) to complete construction. Ashanti’s share price has since languished below US$3 per share. Lonmin has long since withdrawn its interest in acquiring more of Ashanti. The company, which is focused on platinum, is even considering reducing its stake in Ashanti.

The hope is that dropping the government’s golden share will let Ashanti enter the arena of consolidation, allowing shareholders to receive a better return on their investments. It is also a way for the Ghana government to monetize its investment in Ashanti for badly needed cash. Finance Minister Yaw Osafo-Maafo suggested selling at least some of the government’s 20% of Ashanti in May.

Ashanti management told Reuters in April it was in talks with the Kufuor government to remove the golden share. Kufuor’s government is considered more pro-business than the previous Rawlings government, which controlled the country for nearly 20 years.

A Reuters report said that World Bank representatives are expected to visit Ghana in August to help reduce the government’s role in the mining industry. New laws could be enacted as soon as December.